Neutrality-based effective tax rates

Deborah Knirsch

No 249, Tübinger Diskussionsbeiträge from University of Tübingen, School of Business and Economics

Abstract: Effective tax rates (ETRs) are designed to indicate the influence of taxes on investments. Existing ETR models fail to generate ETRs that can be compared to a constant yardstick and to other ETRs. This paper develops a new ETR approach based on neutral tax systems. Integration of neutral taxation into the computation of ETRs overcomes the problem of traditional numerical concepts: Comparison of the new ETR and the statutory tax rate as a constant yardstick reveals preferential or discriminatory taxation of investments. Moreover, the comparison of different ETRs displays which investment is distorted to a higher or lower degree.

Keywords: Effective Tax Rate; Neutral Tax System; Tax Distortion; Investment (search for similar items in EconPapers)
JEL-codes: H21 H25 H32 (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:tuedps:249

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